Professor Fitzpatrick offers the following summary:
I and other scholars have long pointed to the deterrence virtue of the class action to justify its existence even when it was doubtful that it furthered its other purposes, such as compensation or litigation efficiency. In recent years, critics have argued that class actions may not offer even this virtue. Some argue that the entire theory of general deterrence is misguided for class actions and others argue that, whatever the theory, there is no empirical proof that class actions do what the theory says. In this article, I take up these critiques. I find that the theory of deterrence remains just as strong today as it was when it was introduced 50 years ago by the “classical” law and economics movement. Moreover, although there is not a great deal of empirical evidence to support the theory for class actions, there is some, it is uncontroverted, and it is consistent with reams and reams of empirical evidence in favor of deterrence for individual lawsuits. I conclude that the conventional view that the class action can be justified by the deterrence rationale alone remains sound.
Alison Frankel at On the Case brought this to our attention.
This might be a dog bites man story, but it has a twist. Two clients accuse a New York/New Jersey personal injury firm, Finkelstein & Partners, of overcharging them by including charges on their bill allegedly paid to an outside firm, which the suit alleges was owned by the law firm.
Jeffrey Harding of Mahway, New Jersey and his mother, Nancy Harding, hired a personal injury firm, Finkelstein & Partners, to represent them in slip and fall personal injury suits. The suits resulted in fairly substantial settlements, $195,000 and $99,000, for the Hardings. The Hardings complain that charges paid to a company, Total Trial Solutions, were added to their bills in addition to the contingent fees owed the lawyers.
If the charges are a sham, the Hardings should win, get their money plus some, as should any and all other clients who were similarly ripped off, and the lawyers should be disciplined by the New Jersey bar. But if the charges were legitimate, the Hardings and their new lawyer should be ashamed. We'll see what happens.
In 1979 a wrongful death suit was filed claiming that talc sold by a BASF corporate predecessor contained asbestos. Indeed, the suit turned up numerous test and assay results confirming the presence of asbestos, a fact also acknowledged in extensive deposition testimony by the company's scientists and executives. Defense counsel was the law firm of Cahill Gordon and Reindel.
The case settled, the terms including "a confidentiality clause that prohibited the parties from discussing the case or sharing the evidence." As the Third Circuit observed, '[m]uch of the ... evidence has yet to be seen again."
It appears that the company sold this initial as best the suit as the iceberg's tip. And so, according to the complaint, all documentary evidence regarding asbestos containing talc "was thereafter gathered up, collected ... and subsequently ... destroyed or secreted away."
BASF's efforts to evade responsibility did not end with destruction of evidence, according to the complaint. Aided by its law firm, Cahill Gordon & Reindel, it "manufactured favorable evidence" including false affidavits, false and incorrect expert reports and discovery verifications.
The one-two of destroying or concealing inculpatory evidence and manufacturing exculpatory evidence proved effective. The plaintiffs all "discontinued, dismissed or settled" there as best as-injury lawsuits based on the "false representations" of the company and its lawyers, according to the complaint. And the hammer was swung wide: the lawyers threatened plaintiffs and plaintiff's lawyers with sanctions and penalties if they did not accept the false representations and dismiss their lawsuits, according to the complaint.
The scheme began to unravel a few years ago. A former research chemist testified in a case in New Jersey state court that the company's talc contained asbestos, that the company had closed its talc mine because of asbestos and that a company executive had required him to hand over all his asbestos-related documents. This led to the following the Third Circuit recited:
The chemist's testimony triggered discovery into what documents BASF had destroyed or concealed in the litigation. Many of these documents had been secretly in a Cahill storage facility. The case settled and the incriminating documents were placed in escrow pursuant to the terms of the settlement agreement.among the documents are test from 1972, 1977, 1978, and 1979 that establish the presence of asbestos fibers in [the company's] talc. None had ever been produced or disclosed in earlier litigation. (emphasis added).
The plaintiffs claimed that these wrongful and fraudulent actions -- destroying and concealing inculpatory evidence while fabricating exculpatory evidence -- deprived them of fair resolutions of their asbestos injury claims. The district court dismissed the plaintiff's claims, ruling that they were barred by the "litigation privilege."
The "litigation privilege" serves as a form of civil immunity and "generally protects an attorney from civil liability arising from words he has uttered in the course of judicial proceedings." The idea, of course, is to encourage and protect "unfettered expression" in adversary proceedings. The ultimate idea and purpose being that such "unfettered expression" will promote and serve the truth-finding function of the adversary process and its lawsuit. So, in the way that the law can sometimes stand on its head, the question presented was whether the "litigation privilege," a tenet based on protecting the truth-seeking function, can also bear any liability or responsibility for wrongful actions actions that have frustrated and precluded the truth-seeking function by destruction and/or manufacturing of false evidence.
The Third Circuit ruled it could not, finding the proposition a step quite too far. Quite simply, the court concluded that the "litigation privilege" has "never immunized systematic fraud designed to prevent a fair proceeding." So the case was remanded back to the district court for further proceedings.
Countrywide Financial was among the most pernicious and reckless lenders that caused the economic downturn under which our Nation continues to labor. Their practices gave rise to a proposed class action lawsuit filed in federal court in Louisville to consist of "all African-Americans and Hispanic borrowers to whom Countrywide originated a residential-secured loan, including correspondent loans, between January 1, 2002, and the present." The district court ruled the proposed class failed the commonality rule of Fed.R.Civ.Pro 23; the Sixth Circuit affirmed in Miller v. Countrywide Lending, No 12-5250 (January 15, 2013).
Countrywide empowered loan officers and mortgage brokers to increase or decrease a borrower's interest rate within a specified range of the borrower's par rate, a rate used through application of objective factors. Loan officers and brokers received extra compensation from Countrywide "when a loan had a higher interest rate or additional fees." As a result, according to the suit, Countrywide charged African-American borrowers on average 11.64 basis points and Hispanic borrowers 12.50 basis points over the APR paid by white borrowers. The plaintiffs pleaded disparate impact claims under the Equal Credit Opportunity Act, the Fair Housing Act and the Civil Rights Act seeking damages, injunctive relief and declaratory relief. The district court denied class certification.
The Sixth Circuit held that class certification was properly denied under the rule drawn from Wal-Mart v. Dukes, 131 SCt 2541 (2011), explaining as follows:
Both cases challenge policies to grant broad discretion to local agents: Countrywide to local agents who varied home-loan prices[.] ... In both cases, the exercise of discretion is cabined inside clear boundaries: ... Countrywide agents could vary home loans only within a specified range of the predetermined par rate. ... in neither case is it asserted that, for acts of discretion taken within these boundaries, a uniform policy or practice guides how local actors exercise their discretion, such that the corporate guidance caused or contributed to the alleged disparate impacts. ... class members must unite acts of discretion under a single policy or practice, or through a single mode of exercising discretion, and the mere presence of a range within which acts of discretion take place will not suffice to establish commonality.
Conflicts of interest among proposed class action member was a proper basis to deny class action certification the Sixth Circuit ruled recently in Schlaud v. Snyder, No 12-1105 (May 22, 2013). Because of these conflicts the proposed class representatives could not assure the adequacy of representation required by FRCivPro 23(a).
The case and the proposed class action challenged the deduction of union dues or agency fees from state subsidy payments to home childcare providers in Michigan. The class representatives claimed these deductions violated their First Amendment rights.
The proposed class was to consist of any home childcare providers who had the union dues or agency fees deducted. Alternatively, the plaintiffs proposed a subclass of any home childcare provider who did not vote in any union-related elections.
The Sixth Circuit found the class certification issued to turn on whether the named plaintiffs could provide adequacy of representation as required by FRCivPro 23(a). "A class representative must be part of the class and possess the same interest and suffer the same injury as the class members." Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 625-26 (1997).
The proposed class presented two issues regarding adequacy of representation: (1) conflict of interests; and, (2) different alleged injury. The court explained as follows:
Plaintiffs, who alleged that they were compelled to pay the fees under the CBA, have divergent interests from other potential class members, who voted in favor of that same CBA. Further, those who voted for the CBA did not suffer the injury alleged by plaintiffs because they were not compelled to support the Union financially – they voted to do so. Finally, plaintiffs' lawsuit would impair the ability of the Union to represent its members and is, therefore, not in the interest of those proposed class members who voted in favor of using collective action to improve the conditions of [the union members]."
Plaintiffs argued that the proposed subclass cured the conflict of interest issue "because no one in the proposed subclass expressed support for the Union." The court observed that this assertion required it to "assume that any home childcare provider who did not vote in any election related to the Union is opposed to supporting the Union financially", which it refused to do for two reasons: (1) a high turnover rate among home childcare providers supported the conclusion that many of the potential subclass members had not voted in union elections because they were not at the time home childcare providers; and, (2) in each union election a majority of voters supported the union.
Homebuyers' rights under the Real Estate Settlement Procedures Act (RESPA) prohibit any type of kickback or fee-splitting arising from settlement services regardless of whether the homebuyers were overcharged the United States Court of Appeals for the Sixth Circuit recently ruled in Carter v Welles-Bowen Realty, Inc, No 07-3965 (6th Cir, January 23, 2009). In the event of a violation, the homebuyer may recover "an amount equal to three times the amount of any charge paid for such settlement service."
The Carters bought a home and were represented by Welles-Bowen Realty, Inc. (WB Realty), which was co-owned by WB Investors and Chicago Title. WB Realty referred the Carters to WB Title to handle their closing. WB Title charged the Carters $946.28 to title insurance, which included $696.28 for an owner's policy, $75.00 for a title commitment or binder, $100.00 for survey coverage and $75.00 for an environmental protection lien endorsement.
The Carters filed suit claiming that the arrangement violated RESPA, whose section 8 prohibits the following:
(a) Business referrals
No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.
(b) Splitting charges
No person shall give and no person shall accept any portion, split or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed.
The Carters alleged that WB Title was a sham title company which performed no actual settlement work but, nonetheless, received unearned monies from Chicago Title, which actually did the real settlement work. Chicago Title, the Carters further alleged, provided illegal kickbacks or splits in the form of their share of WB Title's profits, which Chicago Title would be paid for its work through its share of the ownership of WB Title. However, the Carters did not claim that they were overcharged.
Whether the Carters were overcharged was irrelevant, the court ruled because a violation of RESPA's anti-kickback prohibitions made "a defendant liable for the charges assessed the home buyer for settlement services as a whole, and not just for overcharges."
A class action lawsuit claiming that coal ash had contaminated drinking water supplies has been settled and awaits judicial approval, the Maryland Daily Record reports, "Fly-Ash Settlement Up For Final Approval." The lawsuit claimed that a power company dumped its coal ash into two quarries while knowing that toxic substances would leach and contaminate their drinking water.
The settlement requires the utility to pay the costs for 84 homes to connect to the public water system, to pay their water bills for up to 10 years, to place $10 million in a trust fund for the injured homeowners and residents, and to stop dumping coal ash in the quarries.
State Farm Insurance Company has agreed to pay an additional $74 million to settle a lawsuit regarding its handling of Hurricane Katrina claims in Mississippi, Mississippi Attorney General Jim Hood announced Wednesday reports the Jackson Clarion-Ledger. In addition, State Farm has agreed to notify some 150 claimants that their claims may be re-evaluated.
